Walmart Inc.

Greetings. Welcome to Walmart's first quarter fiscal 27 earnings call. At this time, all participants are in listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I'll now turn the conference over to Steph Wissing, Senior Vice President, Investor Relations. Thank you, Steph. You may begin.

Welcome, everyone. Joining me today from our home office in Bentonville are CEO John Furner and CFO John David Rainey. We'll begin with highlights of the previous quarter and our outlook for the year. Then we'll open the line for your questions. During the question and answer portion, we've invited Seth Dallaire, our Chief Growth Officer, as well as segment leadership to join. Dave Gugina from Walmart U.S., Chris Nicholas from Walmart International, and Latrice Watkins from Sam's Club U.S. So we can address as many of your questions as possible, please limit yourself to one question. For additional detail on our results, including highlights by segment, please see our earnings release and supplemental presentation on our website. Today's call is being recorded and management may make forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties include, but are not limited to, the factors identified in our filings with the SEC. Please review our press release and slide presentation for a cautionary statement regarding forward-looking statements, as well as our entire safe harbor statement and non-gap reconciliations on our website at stock.walmart.com. That concludes my introduction. John, over to you.

Good morning, and thanks for joining us today. The team delivered strong sales growth for the quarter, and I want to thank our associates for the work they're doing. And getting into stores, clubs, and our supply chain is one of the best parts of my job, whether that's here in the U.S. or places like China and India, where I got to spend time recently. Running an omnichannel business through great stores and clubs requires the best technology and people that embrace innovation while executing the basics every day. No matter where I am in the world, I'm reminded that customers are more alike than not. They want value for their money, a broad assortment, and great experiences, and I love how Walmart delivers across each of these. When I look at the consumer, especially here in the US, they're telling us they're feeling some pressure, and they're looking to Walmart for value. We're continuing to invest in prices, extending the rollbacks we started in the second half of last year, and we now have about 7,200 rollbacks in place. We're also finding ways to help families stretch their dollars as outdoor summer activities get underway. We recently launched a basket of grilling essentials that feeds eight people at under $5 per person. Now, when I look at the business overall, it's performing how we expect it to. We saw strong growth in e-commerce, including advertising and marketplace. We're gaining market share and growth in transactions and units is driving the top line. Transaction growth in the US was the strongest we've seen in six quarters. So I feel great about the way we're executing our strategy. John David will talk more in detail about our results for the quarter, including the impact of higher fuel costs on our operations. And we're pleased to reiterate our outlook for this year. So I'll spend the rest of my time this morning providing some context for how we think about our business. The pace of change is accelerating, and we're moving more quickly to realize the benefits of the business model we've built. We're investing in areas that strengthen our competitive position, including pricing and wages and benefits for our associates. And we're doing this while driving long-term value for our shareholders. One way we're doing this is by taking an enterprise approach to platforms, scaling tech-powered businesses like advertising, marketplace, and fulfillment services and membership alongside our core retail operations to drive growth at a lower marginal cost. We've seen the power of these businesses in the US, and that's reflected in our financial performance over the last few years. We're now taking these learnings and applying them in Canada and Mexico. We're also becoming AI native. Using AI, we can now serve customer needs that previous technologies could not meet, from making shopping easier and more personalized to expanding the range of shopping occasions and interactions we have with our customers and members. And Sparky, our AI shopping agent, is making this possible. Weekly active users are up over 100% just in the last quarter, and our investments in AI have increased Sparky intelligence and response quality by 40% this year. Sparky's becoming more useful by the day. You can now use Sparky in stores and automatically reorder items you have on repeat. Sparky even speaks Spanish these days. And as we've mentioned before, customers using Sparky have an average order value that's about 35% higher than non-Sparky customers. As a merchant, I'm really excited about the growth we see in our assortment. We're expanding choice for our customers and members by improving our first-party assortment, especially in areas of trend and fashion, and we're growing our marketplace. We recently launched Marketplace cross-border into Canada and Mexico, and we like the early results. This is a good example of the benefits we're seeing from building platforms and extending them across markets. We can broaden our assortment, bring on new sellers, and drive incremental profit without the proportional capital investment. And sales on our marketplace in the US grew almost 50% for the quarter. I like how we're partnering with sellers to help them grow their business with us, and this isn't just about marketplace. Through services like advertising and fulfillment, they're leveraging the tools we built to make their businesses even stronger. And now that we're expanding our reach to more countries, we're offering an even better proposition for them. We're also getting faster and more reliable in how we fulfill orders. For the quarter, we delivered more than 3.5 billion units same or next day globally. Investments in our supply chain and the application of AI are improving how we position inventory, make fulfillment decisions, and serve customers and members in real time. Enterprise e-commerce sales grew 26%, and within Walmart US, delivery grew 45%. More than 36% of all U.S. store-fulfilled deliveries in the quarter were delivered in less than three hours. At Sam's Club U.S., delivery from Club grew more than 90%, and sales mix from e-commerce is now at an all-time high. And I'm so impressed by what the teams are doing to speed up delivery solutions in markets that are already high-speed. In India, Flipkart now operates more than 800 micro-fulfillment centers used for fast delivery, something we call Flipkart minutes. And they're delivering items in less than 13 minutes on average. And the team in China delivered over a half billion units in Q1, with about 75% of those arriving in under one hour. Our store and club network, more than 10,900 locations, continues to be a key advantage. It serves as the physical infrastructure that enables speed at a cost structure that is both attractive and improving. As the economics continue to improve, speed becomes an engine of operating leverage, not just a better experience for customers and members. And at the same time, we're making our operations more productive and efficient. Automation across our supply chain in the US continues to scale. Approximately half of our e-commerce fulfillment center volume in Walmart US is automated, and more than 60% of our stores are receiving some level of freight from automated distribution centers. And more than half of our regional distribution centers are in various stages of being retrofitted. As we deploy these capabilities, we're also upskilling associates and creating new opportunities as technology changes how work gets done. We're also strengthening our business mix by scaling higher margin businesses, or what we call commerce solutions. These are areas like advertising, membership, and marketplace, which are becoming more meaningful contributors to our overall profitability. These businesses complement our omnichannel model and support more durable, long-term value creation. For the quarter, our advertising business grew more than 30% for each segment, including 36% for Walmart US. Membership fee revenue grew 17% for the enterprise led by Walmart US. Together, these profit streams represented approximately one-third of operating income. Another way we're mixing out profits better is by improving the performance of general merchandise. This is a priority for us globally. Comps for GM were positive in the US for the quarter. Fashion was a standout again. In international, growth in general merchandise outpaced that of food and consumables overall with help from successful Lunar New Year events. With that, I'll close by saying our business is strong. We have momentum and a clear strategy. We'll continue to reinforce a unique value proposition by focusing on serving customers and members better while improving the economics of our business and positioning us for sustained long-term growth. I'll hand the call over to John David.